Tax Reform and Mobilized Interests

January 4, 2011

One of the big rumors is that this year Obama plans to reform the tax code, and that this reform will include doing away with many “loopholes,” subsidies, and write-off opportunities. This is a great opportunity to demonstrate what exactly a “mobilized interest” is an how, even if that interest group only includes a tiny number of people, that group can easily get what it wants even if it means defying the will of the majority on an issue like, say, closing tax “loopholes.”

Consider by way of example the tax write-off given to pharmaceutical companies for the purchase of many research necessities. Is there any breed of organization Americans are prepared to inflict taxation upon so vociferously as the pharmaceutical company? Competitors for consumer ire are few and far between. The difference between the average American’s relation to the taxation of pharmaceutical firms (or lack thereof) and that of the pharmaceutical companies themselves lies in the fact that you probably didn’t know that this particular tax write-off existed – while pharmaceutical companies have teams of “advocates” dedicated to monitoring just such legislation.

Due to their material wealth and their “personal” interest in the taxation of pharmaceutical firms, pharmaceutical firms are in a state of semi-permanent “mobilization” over this sort of tax write-off. Legal advocates meet with regulators and members of Congress on a daily basis specifically on the issue of pharmaceutical taxation. The average American would probably be happy to hear this write-off going extinct, but the average American isn’t explicitly mobilized on this issue. Legislators receive what is called a weak or uncertain signal from American voters on which tax write-offs to pursue, while they receive an absolute unambiguous signal from lobbyists on which tax write-offs to keep.

Born out in aggregate, this is why we should rarely expect to see tax write-offs disappear, and while tax reform is extraordinarily difficult. Most people agree that increasing tax revenue as a means of fighting the deficit is important. Virtually no consensus exists on what tax increases to pursue – and those facing the tax increase are most likely to speak out the most loudly.

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Two References: MSNBC and The Economist

January 2, 2011

British journalists craft metaphors for their readers. American journalists explain them to theirs.

That’s the conclusion I’m drawing having used MSNBC and The Economist as two of my main news sources over the past few months. I think there’s no argument that the two are comparable – MSNBC has almost fifty million unique visitors per month, while The Economist has about four million such viewers – but especially considering MSNBC gets so much of its content from AP, it seems odd that American news content doesn’t keep up with the elocution of its British brethren.

I base this observation on two sentences, the first from MSNBC, the second from The Economist, both on the subject of the Israel-Palestine peace talks.

But in response to Abbas’ comments, Netanyahu said “he is ready to immediately sit down with Abu Mazen for continuous direct, one on one, negotiations until white smoke wafts” — an allusion to the Vatican’s custom of when Roman Catholic Church officials choose a new pope.

and

After striving for almost two years to shepherd Israeli and Palestinian leaders into direct talks, only for this effort to collapse over the issue of settlements, Mr Obama is in danger of concluding like many presidents before him that Arab-Israeli diplomacy is a Sisyphean distraction.

One website paused to explain a globally-recognized Papal tradition, the other didn’t break its journalistic fourth-wall on behalf of an equally prevalent mythological reference.

Good journalism rests on clarity of communication. While this fact is probably used to justify the hand-holding in the MSNBC article, I think it is actually a point in TE‘s favor: One of these articles had to grind to a halt for a quick vocab lesson, while the other treated its audience like an adult. Can’t American media start doing more of the latter, and less of the former?

New Years’ Prediction

January 2, 2011

I’ve had this idea floating around for awhile now, but if I were going to make one prediction for 2011, it would be this:

By December 31st, 2011, Googling “Darrell Issa” will return at least as many hits as Googling “John Boehner.”

As of 9:30pm on January 1st, Googling “John Boehner” returns 2,380,000 hits while “Darrell Issa” returns a measly 238,000, so I think I’ve made a claim that won’t come about as a result of some predestined secular trend.

I think this prediction is going to come true because Darrell Issa is now the ranking member of the Committee on Oversight and Government Reform, and the Committee on the Judiciary. In particular, the ability of the Committee on Oversight and Government Reform to issue subpoenas to anyone in the government who deals with contractors (i.e., most agency employees and staff-level positions in the Executive and Legislative branches) gives Issa the ability to seriously harass the Administration. This was a tactic made famous during the Clinton Administration, when 1,052 subpoenas were issued to Administration staff under Committee Chair Dan Burton.

Overall it seems Issa is being positioned in a way that will allow him to challenge the legality of virtually any Obama policies that come out in the next two years. It is part of the stated strategy of the Republican Party to do just that once 112 gets going.

In 2010, Wealth Didn’t Necessarily Correspond to Success for Lobbyists

December 26, 2010

In honor of year’s end, TheHill.com has produced a list of “the top ten lobbying victories of 2010.” My initial interest is in the fact that this is actually a list of the top ten lobbying coaliions of the past year, as several of the ranks have tied values. This makes the title of the list seem slightly more acute than might seem: what we’re looking at here is the top ten lobbying victories, not the top ten organizational efforts.

I checked OpenSecrets.org and graphed the 2009-2010 donation totals of TheHill’s list-makers. What’s interesting is that two of the organizations that make their top-ten list were political action committees (524s), which means their self-supporting fundraising was miniscule. One of them, the Taxpayer’s Committee For Common Sense, didn’t even bother to file returns for 2009. Clearly, wealth is only part of the story – yet this fact is belied by the Chamber of Commerce, both one of the tied first-pace stories and clearly one of the wealthiest non-profits in DC.

Without the Chamber of Commerce we lose any statistical correlation between wealth and position on TheHill.com’s list, and even if we include it, the correlation coefficient is miniscule. Merry Christmas, everyone – wealth is not the necessary determinant of legislative success!

“We find that most sweatshop jobs provide an above average standard of living for their workers.”

December 13, 2010

Conventional wisdom vs. empirical evidence at its finest. Un-gated full text and graphics here. .pdf here.

Many studies have shown that multinational firms pay more than domestic firms in Third World countries. Economists critical of sweatshops have responded that multinational firms’ wage data do not address whether sweatshop jobs are above average because many of these jobs are with domestic subcontractors. In this paper we compare apparel industry wages and the wages of individual firms accused of being sweatshops to measures of the standard of living in Third World economies. We find that most sweatshop jobs provide an above average standard of living for their workers.

To many economists this probably makes sense. If a country can attract foreign investment, this is a sign that the country probably has a market-friendly economic environment. If it has a market-friendly economic environment, wage competition is probably a real and present factor of the labor market. If wage competition is a real and present factor of the labor market, new entrants will have to provide some appeal to attract workers…

Random thought edit: Not really sure how I feel about this one yet. One thing I just thought of is that international firms are probably more likely to be able to hire union-busters and other thugs to monitor the workforce. This theoretically dampens the strength of the authors’ claims in two ways: (1) These benefits may disappear in a few years if countries that rely heavily on foreign investment don’t develop things like unions, pensions, and safety regulations, which is probably more likely to be the case if unions are violently and effectively suppressed. (2) Union-busters are probably kleptocrats, i.e., people who work in giant foreign factories may be more likely to have their wages corruption’ed away by their superiors. If either of these are the case, the authors’ argument is overstated.

Though both could theoretically go either way.

The Effects of Redistricting, Typo of the Day, Guest Blogging

December 11, 2010

Just in time for the start of the media frenzy surrounding the supposed effects of redistricting, here are a couple of papers on the subject that defy conventional wisdom. This one, from The Man Himself, Andrew Gelman:

We demonstrate the surprising benefits of legislative redistricting (including partisan gerrymandering) for American representative democracy. In so doing, our analysis resolves two long-standing controversies in American politics. First, whereas some scholars believe that redistricting reduces electoral responsiveness by protecting incumbents, others, that the relationship is spurious, we demonstrate that both sides are wrong: redistricting increases responsiveness. Second, while some researchers believe that gerrymandering dramatically increases partisan bias and others deny this effect, we show both sides are in a sense correct. Gerrymandering biases electoral systems in favor of the party that controls the redistricting as compared to what would have happened if the other party controlled it, but any type of redistricting reduces partisan bias as compared to an electoral system without redistricting. Incorrect conclusions in both literatures resulted from misjudging the erroneous uncertainties present during redistricting periods, making simplified assumptions about the redistricters’ goals, and using inferior statistical methods.

And Bruce Cain, gated unfortunately:

The purpose of this article is to assess the reality behind the politician’s perception that redistricting matters. There are, of course, many dimensions to that perception, because redistricting has many effects. This articles [sic] focuses on the impact of boundary changes on the partisan composition of seats. In order to do this, it will be necessary to specify what the expected partisan effects of redistricting are and how they can be measured. Thus, I first explain how the impact of redistricting will vary with the strategy of particular plans and then explore some techniques for measuring the partisan impact of boundary changes. I conclude with a detailed analysis of the most important congressional redistricting in 1982 – the Burton plan in California.

Next, check out this particularly odd doozie that popped up in an AP piece reprinted on MSNBC. When I first read this story on MSNBC about the Bolivian retirement age being bumped down to 58, I first came across this tragic sentence (my bolding):

Jacob Funk Kierkegaard, an economist at the Peterson Institute in Washington, says he knows of no other country lowering its retirement age at a time when higher life expectancy is burdening national budgets with pension obligations.

“I would say that they are setting themselves up for a train wreck down the road,” he said in a telephone interview. “That they should be willfully going down this road strikes me as very, very shortsighted.”

Other countries re [sic] moving in the opposition direction [sic?]. France has led the charge to raise the minimum retirement age in Europe, increasing it last month to 62, with full benefits not available until age 67. Even socialist Cuba has raised its retirement ages from 60 to 65 for men, and from 55 to 60 for women.

But then this morning I re-checked the story for purposes of writing this post, and they had “corrected” it to this:

Is it just me, or is it still wrong, or at least awkward?

And finally, this week I guest posted on my brother and co.’s fabulous blog, doing a little stats talk about some interesting surveys of philosophy professors. Check it out!

Conservative Affirmative Action

December 9, 2010

This e-mail just landed in my inbox from Campus Reform. In the words of its website, CR is an organization “[c]reated to give conservatives powerful new weapons in their fight for the hearts and minds of the next generation of citizens, politicians, and members of the media, CampusReform.org facilitates the establishment of conservative student networks and supports their development as a powerful voice of activism on their campuses.”

So, imagine my surprise when the e-mail contained, in its entirety, demands for affirmative action in U.S. colleges and universities.

Research from CampusReform.org shows that at the average top university, more than 80% of contributing faculty and staff donated to Democratic candidates in the 2008 presidential election…

The political imbalance at many colleges is simply outrageous. At Harvard, 673 faculty members donated to Democrats, but just 35 donated to Republicans in the 2008 presidential election. At 65 of the top 100 universities, 90% or more of contributing faculty and staff donated to Democrats. At five universities, 100% of contributing faculty and staff donated to Democrats.

It’s up to you to hold your faculty accountable…. Conservative students there dug up and released the facts.

College administrators can’t defend political imbalance this egregious at their universities.

What is this complaint about? CampusReform seems to be angry that the white, highly-educated, middle-aged men who run academia are a lot like other white, highly-educated, middle-aged men. There is a secular trend towards Democratic Party affiliation associated with education attainment. Therefore, it’s a bit surprising to see conservatives demanding affirmative action on their campuses.

How Much Did Democratic Outspending in 2010 Matter?

December 5, 2010

That’s the question prompted by a recent RollCall piece pointing out the vastly more “successful” Democratic fundraising effort in the 2010 Senate races.

The NRCC spent $31.3 million, compared with the DCCC’s $54.8 million in that five-week period.

And while both committees borrowed heavily to fuel their 11th-hour spending sprees, the DCCC finished the period with debts of more than $19.4 million, including nearly $4.5 million in unpaid bills and another outstanding Bank of America loan of $15 million. The NRCC, meanwhile, reported debt of $12 million, having drawn from a $20 million line of credit. Putting the debt aside, each committee finished the period with modest cash balances: $4.7 million for the Republican committee and $3.1 million for the Democrats.

In August I wrote a tongue-in-cheek post about how the Democrats were “winning” their elections because their Congressional and Senate fundraising committees had thus far outraised and under-debted their respective Republican counterparts. When the elections ended, I tweeted to Bob Menendez, “@SenatorMenendez There must be something unprecedented about @dscc streak over @nrsc . #datahunt #2010 #midterms”

Menendez, who was in charge of the Senate effort, did in fact break fundraising records, but my inner political scientist knows this is probably not what made the difference. Spending does little for incumbents, especially when their President is unpopular. This is almost certainly a median voter theorem story, as a couple of the Democrats’ “big saves” – namely, Nevada and Delaware – involved Republican candidates with would-be high NOMINATE scores, each probably in the .85-.95 range. Unfortunately, this is a difficult theory to test, because as one could logically conclude these were the closest races, the ones with the most cash stuffed into them, and the ones that involved the highest-profile Tea Party candidates.

Buzzkill Predictions, Part 2: The Latest WikiLeaks Dump Doesn’t Matter

December 1, 2010

In the last post I tried to offer some ideas as to why the piece of current political pop wisdom that “the future is in cities” is untrue. Similar ideas guide this possibly unfortunate claim: WikiLeaks’ latest data dump won’t change anything about U.S. foreign policy.

The data dump in question includes a smattering of internal U.S. Diplomatic Corps documents, from un-flattering portraits of world leaders to un-flattering recounting of events at which U.S. diplomats were present. The purported danger is that foreign powers now know what various U.S. foreign officials now think of them, what they think their strategies are, their needs and objectives, and so on. As with the points made in our previous discussion, however, the problem is bigger than the outward (or, in this case, inward) signs that things “ought” to change. The problem is that nothing about the decision-making process could actually be changed by this release. Diplomats and spies are duty-bound to create the types of analyses and observations recorded in this data dump. No one strictly did anything wrong. At least not “wrong” in the sense of dereliction of duty. No one’s going to be fired.

If foreign leaders now know how U.S. diplomats have assessed them, what can they do about it? Change their stripes? Are American foreign officials themselves going to stop acting on the basis of the best information they have available – aka, those assessments? No. Light scares cockroaches, but it doesn’t kill them.

At the risk of redundancy unto irrelevance, contemporary political reporting lacks theoretical rigor and practical precision. The claim that “cities could replace nations” is vague and imprecise, as is the claim that U.S. foreign policy is going to “clean up its act.” Both claims fundamentally ignore the power structures that define the status quo, and don’t stop to think that hey, incentives matter.

Buzzkill Prediction: The Future is Not Cities

November 29, 2010

A couple of interesting political predictions hit the news over the past couple of days. One of these is based on the previous issue of Foreign Policy magazine’s cover piece, which theorizes:

The 21st century will not be dominated by America or China, Brazil or India, but by the city. In an age that appears increasingly unmanageable, cities rather than states are becoming the islands of governance on which the future world order will be built.

And the second is the WikiLeaks release, scheduled for today, of another trove of State Department documents, supposedly profiling foreign leaders and detailing U.S. communications with paramilitary groups around the world. Of this event, President Obama implicitly prognosticates that the status quo of American foreign policy is at stake in the decision to release these documents. Each of these visions, in my view, are false. Here’s what I, and a little political science-based common sense, think about that first one. Tomorrow we’ll talk about the second one.

The Future of World Power is Not in Cities

Well – technically it is, but not any more so than it currently is, and the cities that are currently power centers will continue to be power centers. The FP piece basically talks about cities as wielding two types of power: political and economic. The political story begins with some fairly vague claims, such as that “New York and Washington [are] feuding over financial regulation,” and that “Dubai and Abu Dhabi [are] vying for leadership of the United Arab Emirates.” Neither of these ring a bell to me. Perhaps the first bit is referring to Federal level regulation of the financial industry, whose hub is New York City – yet New York legislators are strongly in favor of the Administration’s financial oversight plans (thus far, anyway).

Perhaps what the article was referring to is the problem New York State legislators have with impending financial oversight reform – and that helps reveal why I think this vision of the future is wrong. The ability of New York State legislators to influence public policy outcomes at the national level is incredibly limited – to say nothing of what New York City’s legislators can do. That’s the problem this FP piece ignores. The city may be the locus of economic power but, like it or not, the locus of political and regulatory decision-making is still elsewhere. The Federal government gets to tell New York City-based firms what countries they’re allowed to do business in. Financial organizations in New York are regulated by agencies based in D.C. And there is virtually no authority the mayor of New York City has that could change that.

Something that journalists and futurists of all stripes seem to ignore is the lesson that power is sticky. No matter what share of the economy New York City becomes, the people who currently hold the keys not only lack the mechanism to drastically alter the policy-making landscape, but they lack the incentives to do so. Why would they, after all? What in the history of power has led Foreign Policy to conclude that any meaningful sense of “power” is going to be handed downwards, voluntarily?